The move to the cloud is finally taking place. In category after category of this year's Financial Planning Tech Survey, we found software providers making the shift, and advisors responding. In CRM software, cloud-based providers are gaining share at the expense of desktop-based products; in portfolio management, advisors are moving to a hosted solution where a cloud version is unavailable.

Advisors report that mobile devices like smartphones rank in the top three among technology shifts that have benefited their firms most. Even the growing use of online file-sharing services helps unlock the handcuffs chaining advisors to their desks.

The following pages contain more details on the tools advisors are using to boost efficiency and client satisfaction. Other changes are afoot as well, of course. This year's study pointed to marketplace changes in CRM, rebalancing and portfolio technology. Advisor satisfaction with broker-dealer technology also seems to be on the mend.

A few notes on methodology: The survey was conducted in October. To prevent any ballot-box stuffing, Financial Planning sent out thousands of individual-use links to advisors; we got more than 1,100 responses, several times the number need to ensure statistical accuracy, according to polling experts.

We dissected the results by business model to get a feel for the similarities and differences in the way independent RIAs differ in their approach from hybrid advisors and those linked to independent broker- dealers. We also added a new level of analysis this year, exploring how firms of varying sizes (as measured by AUM) differ in their technology decisions.



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One thing that we wanted to gauge at the outset was whether advisors were as willing to spend on technology as they were last year. Apparently, they are: Those who expect their technology budgets to grow in 2014 is flat (35% versus 36% last year), as is the relatively small slice who expect their budgets to shrink.

The results suggest that advisors understand that technology is an investment in their business as opposed to an expense, and that it will pay dividends. What we did not know, but often assumed, is that behaviors would differ across firm size.

We can now confirm this: Noticeably fewer (27.5%) of the smallest firms, with less than $10 million in AUM, are likely to increase tech spending in 2014. One possible reason is that capital may be tight at smaller firms; the other is that technology enhancements may not provide as much operational leverage.

Indeed, the firms most likely (41.5%) to increase tech spending in 2014 are those managing between $50 million and $99.9 million in assets. That's unsurprising: Firms of this size have the scale to truly benefit from technology investments, and if they are growing, may not have invested as deeply when they were smaller. This bodes well for broker-dealers, custodians and vendors who serve this segment, which accounted for about 12% of our respondents.



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One place the cloud shift is evident is in the CRM category, where we see a slow but clear trend toward more modern cloud-based tools and away from desktop-server-based systems. Redtail made some incremental gains in share this year, as did Salesforce and Tamarac Advisor CRM, to cite a few examples. Meanwhile, older technologies slipped: ACT! dropped to a 7% share from 9% last year and ACT4Advisors dropped to 1.2% from 2%, with weak showings for both among independent RIAs. Goldmine fell, as well.

Junxure, a former darling among sophisticated independent RIAs, showed some slippage, as did ProTracker. Both are about to release totally new cloud versions of their software, and it will be interesting to see the impact of these releases. We think both will attract some serious attention.

Redtail, the overall leader among real CRM systems, did particularly well with hybrids, although it also had strong usage among independent broker-dealer reps and RIAs. And Micro- soft Outlook still gets too many votes in our survey, but its share is way down from last year (22.2% versus 35%), suggesting that advisors are finally beginning to realize that Outlook is no substitute for a real CRM system. (Although almost a third of the smallest firms are still using Outlook.)

We've long theorized that Redtail is most popular at the low end of the AUM scale and least popular at the high end. Redtail is inexpensive, which appeals to smaller firms with smaller tech budgets, and it is not as robust as some of the more expensive systems. But Redtail has been getting a steady stream of incremental upgrades, making it a more powerful product than it was a few short years ago.

Probably for that reason, we found we were only partly right. Redtail did score poorly among firms with more than $500 million in AUM, but the group with the next lowest usage was firms with less than $10 million in AUM. The highest Redtail usage was in the $25 million to $49.9 million group, and it fared almost as well among firms with $100 million to $499.9 million. We only saw a substantial shrinkage in market share among the biggest firms.

When we sliced the CRM market share based on compensation models, we found that fee-only advisors were more likely to use Junxure, Salentica and Tamarac Advisor CRM, while ACT!, Advisors Assistant and Ebix scored substantially better with hybrid advisors. Redtail did a bit better with the fee and commission crowd, but exhibited good strength across both roles, as did Salesforce.



Rebalancing software has become a growth segment of the market. Although 60.6% of advisors are not using any rebalancing software at all, that number is markedly lower than last year's 69%. And the bigger the firm, the more likely it is to use rebalancing software: Less than half of firms with more than $500 million in AUM have not purchased rebalancing software, compared with 78.1% of the smallest firms.

No surprise there: The better programs, which feature both tax and location sensitivity, tend to be pricey, and advisors who are only monitoring a limited number of accounts might believe (mistakenly, in our view) that they don't need this type of software.

Last year, we did not include Morningstar Office in the rebalancing category; this year, we did - and it debuts in the top spot. Morningstar only rebalances at the account level, not at the client or household level, and it is not tax aware, so it is no competition for the more sophisticated products, but it is apparently sufficient for many advisors, across all AUM levels. One reason may be that the tool is included as part of the Morningstar Office package.

Among the more robust products, Tamarac leads with a 3.8% share, and with almost all its users above the $100 million AUM cutoff. The same can be said for iRebal.

We also asked about iRebal Cloud, because we expected it to be available to all TD Ameritrade advisors by the time of the survey, but the general release has been delayed, so the user base was insignificant. We expect it to be very popular with advisors that custody exclusively with TD Ameritrade.



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It should come as no surprise that, as the cloud shift continues and advisors are less tied to their desks, mobile adoption grew, as well. This year, 58.8% of advisors told us they use a tablet for business, up from about 50% last year. Of those, 77.5% use an iPad and 18.6% use an Android tablet. The surprise here was the Windows tablet showing; 11.5% of the tablet users say they use one.

It is also interesting to note the usage variations by type of advisor. For example, 22% of CPA advisors who own a tablet for work use a Windows tablet, as do 15.4% of insurance advisors. And insurance agents are just as likely to own an Android tablet as they are an iPad.

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Smartphone adoption is still growing, too, with 87% of advisors now saying they use a smartphone for work; that's up from 80% last year. The iPhone is the dominant brand, with a 62.3% share, followed by Android at 35.9% and BlackBerry still in the mix at 8.8% - with its users dominated by bank advisors and broker-dealer employees. It is worth noting that while Windows tablets surprised us on the upside, Windows phones did not, showing a mere 2.1% share.



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Speaking broadly, social media adoption appears to have plateaued. The numbers from this year for the most used outlets (LinkedIn, Facebook, Twitter, Google+ and YouTube) are remarkably similar to last year's.

When you break those numbers down by revenue, however, some interesting patterns emerge. The smallest firms (those with less than $10 million in AUM) made greater use of every single social media platform we asked about - by a significant margin in some cases. For example, the smallest firms were almost twice as likely as the average firm to use Google+, and about 40% more likely than average to use Facebook.

There could be multiple explanations: Many of these firms are new, so in some cases they may be run by younger, more tech-savvy advisors. And social media is an inexpensive way for startups to build brand awareness.

Or course, there's another plausible explanation (although we hope this is not the case): inexperience may mean they are less aware of the regulations and requirements with regard to social media usage.

There were other marked differences in social media use. Independent RIAs are the leaders here - significantly more likely to use Twitter, for instance, and somewhat more likely to use Facebook, LinkedIn and YouTube. This is probably because they have more control over their own compliance policies, and because there are numerous low-cost compliance/archiving technologies available to them.



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One area where software use showed a disappointing decline was in financial planning tools, where 30.6% of respondents said they are not using financial planning software - up from 26% last year. That's a shame, we think, because many financial planning software packages are more user-friendly, making it easier and faster than ever to provide meaningful results to a body of clients who badly need it.

It's worth noting that a whopping 57.5% of commission-based advisors do not use financial planning software.

MoneyGuidePro continues its dominance this year with a 22% market share, with consistently high usage across firms of all sizes. The No. 2 product, eMoney, was also consistent across the AUM spectrum, with the exception of the smallest segment, where firms might consider eMoney too pricey.

Zywave's NaviPro Suite does well at firms with more than $50 million in AUM, but is strongest above the $500 million mark - no doubt because of its detailed cash flow planning capability. And we are keeping an eye on SunGard, which also seems to do better with higher-asset firms. After many years of stagnation, the firm is introducing new products again and refining existing ones.



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Portfolio management, with 23 products listed this year, is one of the most competitive software categories. A primary reason for this is money: Price tags in this category tend to be high, so software developers find it an attractive market. We also think that, with few exceptions, the reporting capabilities of vendors in this space lag advisor expectations - as well as those of their clients - by a significant margin. For these reasons, we expect new products to continue to launch in this space.

As was the case last year, Morningstar and Albridge dominated the rankings, although the gap has closed a bit this year. Albridge, which has always had a strong focus on the institutional side of the business, gets the majority of its business from advisors who charge a combination of fees and commissions, with most of the remainder coming from commission-only advisors. But Morningstar Office users were fairly evenly split among the compensation models.

Dominant products for fee-only advisors - by a wide margin - were Schwab's PortfolioCenter and Advent Axys. Addepar, which has generated a lot of industry buzz, had only a 0.1% share in its survey debut.

Albridge's former CEO told us that he struggled to find a cost-effective service model for independent RIAs. But change may be coming. Pershing veteran Marc Butler is now a managing director at Albridge, and we expect the company to release a totally new version of its portfolio software in the first half of 2014.

Because Schwab is the largest custodian to independent RIAs, it makes sense that PortfolioCenter shows strength in that sector. Over the last several years, however, the product seems to be slipping in the rankings, which we attribute to advisors' dissatisfaction with the application's reporting capabilities. Schwab is aware of the complaints; we expect it to launch a new application to address the issue, but probably not till sometime in 2015.



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Compared with the custodians for independent advisors, broker-dealers have lagged for years in technology satisfaction. But the B-Ds' technology fortunes appear to be rising, suggesting that they've discovered what the RIA custodians figured out a few years ago: Good technology increases efficiency and client satisfaction.

No B-D has a higher percentage of very satisfied advisors than Raymond James, where a significant investment in technology over the last several years is paying off. The percentage of respondents who are very satisfied with Raymond James technology doubled this year to 42.7%.

NFP's gains are impressive, as well, with the B-D more than doubling the percentage of very satisfied advisors to 39% from 16.9%. Other B-Ds with a high percentage of very satisfied advisors include Securities America (38.5%) and Cambridge Investment Research (37.8%).

Among the custodians, TD Ameritrade leads the pack, with 47.6% of their advisors saying they're very satisfied with the technology. Much of this is due to the very popular VEO Open Access integration initiative, but TD's decision to release a free, cloud-based version of iRebal to advisors next year no doubt helped perceptions, as well.

Schwab is within striking distance, with 44.0% of very satisfied advisors. Fidelity is third at 36.2%.

Among the custodians with a reputation for welcoming small advisors, TradePMR scored the best. We believe the company's new Fusion platform will propel it to even better scores next year, but this year's transition from the old platform may have held back scores. Shareholders Service Group came in a strong second.



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One new area we studied this year was the link between hype and awareness of some new technology products. Because we've often been surprised by the disproportionate attention some unproven new technologies have received, we wanted to find out whether a few heavily covered new products had actually gained high brand awareness - or use.

We selected three new products: Blueleaf, InStream and Market 76. We expected to find that a significant proportion of readers were at least familiar with the brands.

That turned out not to be the case: Fewer than 10% of respondents had heard of Market 76, fewer than 15% had heard of InStream and fewer than 20% of readers knew Blueleaf. Usage ranked from 0.2% for Market 76 to a high of 0.8% for InStream.

Since all three providers started out as either free or low-cost solutions, we thought that smaller advisors, with their smaller tech budgets, might have greater familiarity with these firms.

We were wrong. Across all three products, advisors with less than $25 million in AUM were less likely than the average reader to have heard of these firms.



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Another area of change is operating systems. Last year, we commented on the high number of Windows XP machines that were still in use. That operating system is more than a decade old, and Microsoft will stop supporting Windows XP in April.

Thankfully, advisors are starting to heed the call to upgrade. Just 22.3% of respondents said they have an XP machine, versus 37% last year. We optimistically (perhaps we hould say foolishly) hope that number drops to zero by April.

We also expect Windows 8 to continue to climb in market share. While Windows 7 usage has remained steady, 21.7% of respondents now have at least one Windows 8 machine, up from none last year.



Although the overall technology picture is positive, there are some issues that continue to worry us.

Advisor satisfaction with integration remains low. Only 14.9% of advisors are very satisfied with integration, with 26% either somewhat or very dissatisfied.

Another worry: 43% of advisors say they evaluate technology based on cost alone, compared with only 9.6% that do a formal ROI analysis. That suggests that advisors may be making poor decisions.

That said, when we asked which technology had the greatest impact on your firm over the past year, advisors cited CRM tools, financial planning software and smartphones - all of which sounds good to us, as advisors work to improve both efficiency and client relationships.

It's also worth noting that there are a few things that don't show up in this year's survey, largely because of timing. Some promising new firms aren't mentioned because they have not built a meaningful market share.

Among the new cloud-based CRM products, Junxure Cloud's delayed general release made it a very minor presence; we expect to see much better numbers next year. We also left ProTracker Cloud off the survey because it was not yet available, but it will be by the time you read this; we'll be reporting next year on how it performs.

We're also curious about attitudes toward Windows 8. More than 22% of respondents said they were using the operating system, with only 14% planning to switch this year - but the survey closed the day before Windows 8.1 was released. We wonder if the upgrade, which returns the Start button and allows users to choose a more familiar Windows look and feel, will persuade more advisors to switch.

Although technology advances for financial advisors are often slower and more painful than some would like, the overall trends are positive.

Generally speaking, advisors are moving to the cloud and leveraging mobile more than they did a year or two ago. Broker-dealers and custodians are investing heavily in new technologies and being rewarded with higher satisfaction ratings, a trend we expect to continue into 2014. Third-party vendors are investing in technology, too, and we expect a number of new and interesting firms to come to market next year.

Challenges remain, but the industry is making progress.


6 Biggest Tech Trends for 2014


Joel Bruckenstein, a Financial Planning columnist in Miramar, Fla., is co-creator of the Technology Tools for Today conference series and technology guides for advisors, including Technology Tools for Today's High-Margin Practice. For more information, visit

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